Linking supply chain strength to sustainable development: a country-level analysis

Abstract

Several global corporations have been severely criticized by different lobbying groups for the impact of their operations on the natural environment and on the local communities. Because corporate operations cannot be studied in isolation but rather as a part of a large network often referred to as a supply chain, this paper investigates the potential link between supply chain characteristics and sustainable development at the country level. In particular, the linkage between supply chain strength, generally defined as the number and quality of the suppliers and customers in a country, and the three dimensions of sustainable development namely environmental performance, corporate environmental practices, and social sustainability is assessed. Using archival data from The Global Competitiveness Report (2004–2005) and the 2005 Environmental Sustainability Index, a statistical assessment of the linkage was conducted. The results indicate that supply chain strength is positively linked to all three dimensions of sustainable development.

Introduction

Both the natural environment and social equity are now recognized as major pillars of sustainable development. Over the last decade, increasing concern about the threats from climate change and natural resource depletion has been evident across several industries and in the global population. Besides being asked to contribute to the safeguard of the natural environment, corporations are also required to include social equity aspects in their day-to-day operations. For example, the anti-globalization movement condemns the creation of wealth without an extensive redistribution of that wealth throughout the world. Hence, production capabilities around the globe must/should be more efficient in using both natural and human resources in order to provide optimal environmental and social development. Consequently, all industries will be challenged to reorganize their supply chains while preserving the natural environment and respecting local communities.

One consequence of this general concern for sustainable development is the greater scrutiny of manufacturing organizations' practices by different stakeholders. Over recent decades, increasing attention from different lobby groups regarding worldwide manufacturing organization's supply chain management has been observed [1], [2]. For instance, academic research acknowledges that the impact of manufacturing organizations on the natural environment and social equity should not be studied from an isolated perspective but rather by explicitly recognizing upstream and downstream organizations in the supply chain [3], [4]. Although several studies linking supply chain management to the natural environment have been published in recent years [1], [5], [6], [7], [8], [9], very few have focused on corporate social behavior.¹ Most of these studies have considered the manufacturing plant or firm as the unit of analysis and rarely have they made an assessment of the entire supply chain, particularly when survey methodology was adopted. This paper departs from the usual supply chain studies by considering aggregate data at the country level. It contributes to the existing literature in two ways. First, it develops the concept of a country's supply chain strength. Supply chain strength is defined as the availability and quality of local organizations that compose the supply chain. The development and measurement of such a concept allow assessing, from a holistic and more macro perspective, the potential influence of supply chain design.

Second, it empirically tests the relationship between a country's supply chain strength and different dimensions of sustainable development namely: (i) environmental performance, (ii) corporate environmental practices, and (iii) social sustainability. Given the perception of a trade-off between industrial development and sustainability, such an empirical analysis becomes insightful for economic developers around the world and for analysts of international agencies (e.g., the World Bank). From a theoretical and conceptual standpoint, this empirical analysis fits well with the early stage of research on the link between supply chain and environmental management.

There are five additional sections to this paper. Next, in Section 2, the literature is reviewed and the concept of supply chain strength is developed. Section 3 presents the theoretical link between supply chain strength and sustainable development and proposes a series of three hypotheses. The methodology, which includes the presentation of the data employed and the construction of the variables needed for the analysis, is found in Section 4. In Section 5, statistical results from the analysis are presented. The discussion of the results and concluding remarks form Section 6, the last section of this paper.